SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

þ		QUARTERLY REPORT PURSUANT TO SECTION 13 AND 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2007

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _________________

CLEAR CHANNEL COMMUNICATIONS, INC.

(Exact name of registrant as specified in its charter)

Texas (State of Incorporation)		74-1787539 (I.R.S. Employer Identification No.)

200 East Basse Road San Antonio, Texas (Address of principal executive offices)		78209 (Zip Code)

(210) 822-2828
(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes þ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check One):

Large accelerated filer þ		Accelerated filer o		Non-accelerated filer o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes o No þ

Indicate the number of shares outstanding of each class of the issuer’s classes of common stock, as of the latest practicable date.

Class		Outstanding at August 7, 2007
Common Stock, $.10 par value		497,932,764

 

 

CLEAR CHANNEL COMMUNICATIONS, INC. AND SUBSIDIARIES

INDEX

		Page No.
Part I — Financial Information
Item 1. Unaudited Financial Statements			3
Consolidated Balance Sheets at June 30, 2007 and December 31, 2006			3
Consolidated Statements of Operations for the six and three months ended June 30, 2007 and 2006			5
Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2007 and 2006			6
Notes to Consolidated Financial Statements			7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			15
Item 3. Quantitative and Qualitative Disclosures About Market Risk			27
Item 4. Controls and Procedures			27
Part II — Other Information
Item 1. Legal Proceedings			28
Item 1A. Risk Factors			28
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			29
Item 4. Submission of Matters to a Vote of Security Holders			29
Item 6. Exhibits			30
Signatures			31
Index to Exhibits			32
Statement re: Computation of Per Share Earnings
Statement re: Computation of Ratios
Certification of CEO Pursuant to Section 302
Certification of CFO Pursuant to Section 302
Certification of CEO Pursuant to Section 906
Certification of CFO Pursuant to Section 906

PART I

Item 1. UNAUDITED FINANCIAL STATEMENTS

CLEAR CHANNEL COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
(In thousands)

		June 30,				December 31,
		2007				2006
		(Unaudited)				(Audited)
CURRENT ASSETS
Cash and cash equivalents		$	91,784			$	116,000
Accounts receivable, net of allowance of $58,324 in 2007 and $56,068 in 2006			1,668,713				1,619,858
Prepaid expenses			138,333				122,000
Other current assets			236,250				244,103
Income taxes receivable			—				7,392
Current assets from discontinued operations			84,292				96,377
Total Current Assets			2,219,372				2,205,730
PROPERTY, PLANT AND EQUIPMENT
Land, buildings and improvements			794,718				768,574
Structures			3,707,008				3,601,653
Towers, transmitters and studio equipment			606,251				587,929
Furniture and other equipment			547,661				524,378
Construction in progress			106,973				89,823
			5,762,611				5,572,357
Less accumulated depreciation			2,809,573				2,605,774
			2,953,038				2,966,583
Property, plant and equipment from discontinued operations, net			235,508				269,627
INTANGIBLE ASSETS
Definite-lived intangibles, net			493,548				522,482
Indefinite-lived intangibles — licenses			4,191,539				4,199,971
Indefinite-lived intangibles — permits			245,593				260,950
Goodwill			7,116,195				7,082,024
Intangible assets from discontinued operations, net			513,914				540,900
OTHER ASSETS
Notes receivable			6,561				6,318
Investments in, and advances to, nonconsolidated affiliates			330,448				311,258
Other assets			281,063				249,524
Other investments			236,923				245,064
Other assets from discontinued operations			24,760				35,547
Total Assets		$	18,848,462			$	18,895,978

See Notes to Consolidated Financial Statements

CLEAR CHANNEL COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS’ EQUITY
(In thousands)

		June 30,				December 31,
		2007				2006
		(Unaudited)				(Audited)
CURRENT LIABILITIES
Accounts payable		$	112,821			$	151,577
Accrued expenses			882,237				884,479
Accrued interest			103,504				112,049
Accrued income taxes			46,776				—
Current portion of long-term debt			688,821				336,375
Deferred income			186,332				134,287
Current liabilities from discontinued operations			28,943				45,079
Total Current Liabilities			2,049,434				1,663,846
Long-term debt			6,519,119				7,326,700
Other long-term obligations			81,421				68,509
Deferred income taxes			695,469				746,617
Other long-term liabilities			782,652				673,953
Long-term liabilities from discontinued operations			22,029				24,621
Minority interest			383,007				349,391
Commitments and contingent liabilities (Note 6)
SHAREHOLDERS’ EQUITY
Common Stock			49,807				49,399
Additional paid-in capital			26,833,564				26,745,687
Retained deficit			(18,902,708	)			(19,054,365	)
Accumulated other comprehensive income			338,474				304,975
Cost of shares held in treasury			(3,806	)			(3,355	)
Total Shareholders’ Equity			8,315,331				8,042,341
Total Liabilities and Shareholders’ Equity		$	18,848,462			$	18,895,978

See Notes to Consolidated Financial Statements

CLEAR CHANNEL COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(In thousands, except per share data)

		Six Months Ended June 30,								Three Months Ended June 30,
		2007				2006				2007				2006
Revenue		$	3,263,343			$	3,056,856			$	1,778,237			$	1,688,844
Operating expenses:
Direct operating expenses (includes share-based payments of $8,172, $8,106, $5,172 and $4,086 for the six and three months ended June 30, 2007 and 2006, respectively, and excludes depreciation and amortization)			1,293,752				1,194,454				671,094				617,323
Selling, general and administrative expenses (includes share-based payments of $7,331, $8,394, $4,499 and $4,210 for the six and three months ended June 30, 2007 and 2006, respectively, and excludes depreciation and amortization)			845,606				827,438				437,924				432,459
Depreciation and amortization			279,637				289,299				141,310				148,189
Corporate expenses (includes share-based payments of $6,082, $5,735, $3,668 and $2,332 for the six and three months ended June 30, 2007 and 2006, respectively, and excludes depreciation and amortization)			91,194				88,746				43,044				48,239
Merger expenses			4,370				—				2,684				—
Gain (loss) on disposition of assets — net			11,041				49,221				4,090				821
Operating income			759,825				706,140				486,271				443,455
Interest expense			234,499				237,674				116,422				123,298
Gain (loss) on marketable securities			(15	)			(3,324	)			(410	)			(1,000	)
Equity in earnings of nonconsolidated affiliates			16,699				16,624				11,435				9,715
Other income (expense) — net			328				(5,257	)			340				(4,609	)
Income before income taxes, minority interest and discontinued operations			542,338				476,509				381,214				324,263
Income tax benefit (expense):
Current			(150,782	)			(106,764	)			(120,989	)			(104,542	)
Deferred			(73,912	)			(93,931	)			(36,494	)			(33,417	)
Income tax benefit (expense)			(224,694	)			(200,695	)			(157,483	)			(137,959	)
Minority interest expense, net of tax			15,245				12,957				14,970				13,736
Income before discontinued operations			302,399				262,857				208,761				172,568
Income from discontinued operations, net			35,813				31,445				27,229				24,920
Net income		$	338,212			$	294,302			$	235,990			$	197,488
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments			45,889				26,386				37,138				17,297
Unrealized gain (loss) on securities and derivatives:
Unrealized holding gain (loss) on marketable securities			(11,177	)			(62,959	)			(4,218	)			(38,901	)
Unrealized holding gain (loss) on cash flow derivatives			—				61,001				—				35,437
Comprehensive income		$	372,924			$	318,730			$	268,910			$	211,321
Net income per common share:
Income before discontinued operations — Basic		$	.61			$	.52			$	.42			$	.34
Discontinued operations — Basic			.07				.06				.06				.05
Net income — Basic		$	.68			$	.58			$	.48			$	.39
Weighted average common shares — basic			494,105				509,591				494,364				501,136
Income before discontinued operations — Diluted		$	.61			$	.52			$	.42			$	.34
Discontinued operations — Diluted			.07				.06				.06				.05
Net income — Diluted		$	.68			$	.58			$	.48			$	.39
Weighted average common shares — diluted			495,280				510,392				495,688				502,060
Dividends declared per share		$	.375			$	.375			$	.1875			$	.1875

See Notes to Consolidated Financial Statements

CLEAR CHANNEL COMMUNICATIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(In thousands)

		Six Months Ended June 30,
		2007				2006
Cash flows from operating activities:
Net income		$	338,212			$	294,302
(Income) loss from discontinued operations, net			(35,813	)			(31,445	)
			302,399				262,857
Reconciling items:
Depreciation and amortization			279,637				289,299
Deferred taxes			73,912				93,931
(Gain) loss on disposal of assets			(11,041	)			(49,221	)
(Gain) loss forward exchange contract			9,505				11,406
(Gain) loss on trading securities			(9,490	)			(8,082	)
Provision for doubtful accounts			16,091				13,232
Share-based compensation			21,585				22,235
Equity in earnings of non-consolidated affiliates			(16,699	)			(16,624	)
Other reconciling items — net			13,935				25,537
Changes in operating assets and liabilities:
Federal income tax refund			—				133,336
Decrease in income taxes receivable			58,944				82,020
Changes in other operating assets and liabilities, net of effects of acquisitions and dispositions			(79,780	)			(87,182	)
Net cash provided by operating activities			658,998				772,744
Cash flows from investing activities:
Increase in restricted cash			—				(81,333	)
Decrease (increase) in notes receivable — net			(242	)			(1,155	)
Decrease (increase) in investments in and advances to nonconsolidated affiliates — net			10,331				2,614
Purchases of investments			(384	)			(461	)
Purchases of property, plant and equipment			(152,373	)			(147,755	)
Proceeds from disposal of assets			18,280				60,280
Acquisition of operating assets, net of cash acquired			(51,539	)			(149,441	)
Decrease (increase) in other — net			(25,386	)			(66,998	)
Net cash used in investing activities			(201,313	)			(384,249	)
Cash flows from financing activities:
Draws on credit facilities			368,872				1,943,270
Payments on credit facilities			(576,527	)			(1,509,325	)
Proceeds from long-term debt			12,481				506,159
Payments on long-term debt			(261,873	)			(49,287	)
Payments for purchase of common shares			—				(1,103,737	)
Proceeds from exercise of stock options, stock purchase plan, common stock warrants and other			75,985				14,036
Dividends paid			(185,641	)			(196,377	)
Net cash used in financing activities			(566,703	)			(395,261	)
Cash flows from discontinued operations:
Net cash provided by operating activities			33,459				55,456
Net cash provided by (used in) investing activities			51,343				(26,963	)
Net cash provided by (used in) financing activities			—				—
Net cash provided by discontinued operations			84,802				28,493
Net (decrease) increase in cash and cash equivalents			(24,216	)			21,727
Cash and cash equivalents at beginning of period			116,000				84,337
Cash and cash equivalents at end of period		$	91,784			$	106,064

See Notes to Consolidated Financial Statements

CLEAR CHANNEL COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

Note 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Preparation of Interim Financial Statements

The consolidated financial statements were prepared by Clear Channel Communications, Inc. (the “Company”) pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) and, in the opinion of management, include all adjustments (consisting of normal recurring accruals and adjustments necessary for adoption of new accounting standards) necessary to present fairly the results of the interim periods shown. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States have been condensed or omitted pursuant to such SEC rules and regulations. Management believes that the disclosures made are adequate to make the information presented not misleading. Due to seasonality and other factors, the results for the interim periods are not necessarily indicative of results for the full year. The financial statements contained herein should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s 2006 Annual Report on Form 10-K.

The consolidated financial statements include the accounts of the Company and its subsidiaries. Investments in companies in which the Company owns 20 percent to 50 percent of the voting common stock or otherwise exercises significant influence over operating and financial policies of the company are accounted for under the equity method. All significant intercompany transactions are eliminated in the consolidation process.

Merger Update

On May 17, 2007 the Company entered into a second amendment to its previously announced Merger Agreement with a private equity group co-led by Thomas H. Lee Partners, L.P. and Bain Capital Partners, LLC. Under the terms of the Merger Agreement, as amended, the Company’s shareholders can elect to have each share of the Company’s common stock they own to be converted into the right to receive either (1) $39.20 in cash, without interest, or (2) one share of Class A common stock of CC Media Holdings, Inc, a corporation formed by the private equity group that, after the merger, will be the ultimate corporate parent of the Company.

Unaffiliated shareholders and option holders of the Company will have the right to select the form of merger consideration they receive. This election is subject to pro rata adjustment in the event that elections to receive Class A common stock would require CC Media Holdings, Inc. to issue more than 30.6 million shares of Class A common stock, or approximately 30% of the outstanding capital stock and voting power of CC Media Holdings, Inc., immediately following the merger. In addition, no shareholder or option holder who has selected the stock consideration may be allocated a number of CC Media Holdings, Inc. Class A common stock representing more than 9.9% of the outstanding common stock of CC Media Holdings, Inc., immediately following the merger. The limitation on the aggregate number of shares to be issued as stock consideration will allow up to a maximum of approximately 6% of the shares of the Company’s common stock and stock options outstanding as of the record date of the special meeting to be converted into Class A common stock of CC Media Holdings, Inc. as merger consideration.

The consummation of the merger is subject to shareholder approval, antitrust clearances, FCC approval and other customary closing conditions. Assuming satisfaction of the closing conditions, the parties expect to close the merger during the fourth quarter of 2007.

Certain Reclassifications

The Company has reclassified certain selling, general and administrative expenses to direct operating expenses in 2006 to conform to current year presentation. As a result of the divestiture of certain of its radio stations and its television business, the historical footnote disclosures have been revised to exclude amounts related to these businesses.

Discontinued Operations and Assets Held for Sale

On November 16, 2006, the Company announced plans to sell certain radio markets, comprising 448 of its radio stations, as well as all of its television stations. The radio markets are located outside the top 100 U.S. media markets. As of June 30, 2007, the Company had sold 26 radio stations, 5 of which were not part of the announced 448 stations, and had definitive agreements to sell an additional 374 radio stations, 8 of which were not part of the announced 448 stations. The closing of the transactions under definitive asset purchase agreements are subject to antitrust clearances, FCC approval and other customary closing conditions. The Company determined that each of these markets represents a disposal group. Consistent with the provisions of Statement of Financial Accounting Standards No. 144, Accounting for the Impairment or Disposal of Long-lived Assets (“Statement 144”), the Company classified these markets’ assets and liabilities that are subject to transfer under the definitive asset purchase agreements as

discontinued operations at June 30, 2007 and December 31, 2006. Accordingly, depreciation and amortization associated with these assets was discontinued. Additionally, the Company determined that these markets comprise operations and cash flows that can be clearly distinguished, operationally and for financial reporting purposes, from the rest of the Company. As of June 30, 2007, the Company determined that the estimated fair value less costs to sell attributable to these markets was in excess of the carrying value of their related net assets held for sale.

On April 20, 2007, the Company entered into a definitive agreement to sell its television business for approximately $1.2 billion. The transaction is expected to close in the fourth quarter of 2007, subject to regulatory approvals and other customary closing conditions. Consistent with its radio station divestitures, the Company classified its television business as discontinued operations at June 30, 2007 and December 31, 2006 and presented the results of operations as discontinued operations, net of tax, for all periods presented. As of June 30, 2007, the Company determined that the estimated fair value less costs to sell attributable to its television business was in excess of the carrying value of their related net assets held for sale.

Summarized operating results for the six and three months ended June 30, 2007 and 2006 from these businesses are as follows:

		Six Months								Three Months
(In thousands)		2007				2006				2007				2006
Revenue		$	282,071			$	301,941			$	146,463			$	163,908
Income before income taxes		$	62,391			$	44,268			$	48,276			$	33,744

Included in income from discontinued operations, net are income tax expenses of $26.6 million, $12.8 million, $21.0 million and $8.8 million for the six and three months ended June 30, 2007 and 2006, respectively. Also included in income from discontinued operations for the six and three months ended June 30, 2007 is a gain on the sale of certain radio stations of $19.6 million and $16.8 million, respectively.

The following table summarizes the carrying amount at June 30, 2007 and December 31, 2006 of the major classes of assets and liabilities of the Company’s businesses classified as discontinued operations:

(In thousands)		June 30,				December 31,
Assets		2007				2006
Accounts receivable, net		$	70,673			$	75,490
Other current assets			13,619				20,887
Total current assets		$	84,292			$	96,377
Land, buildings and improvements		$	106,075			$	137,729
Transmitter and studio equipment			286,641				298,173
Other property, plant and equipment			41,009				37,651
Less accumulated depreciation			(198,217	)			(203,926	)
Property, plant and equipment, net		$	235,508			$	269,627
Definite-lived intangibles, net		$	307			$	335
Licenses			128,630				131,691
Goodwill			384,977				408,874
Total intangible assets		$	513,914			$	540,900
Film rights		$	16,486			$	20,442
Other long-term assets			8,274				15,105
Total non current assets		$	24,760			$	35,547
Liabilities
Accounts payable and accrued expenses		$	3,321			$	5,345
Film liability			14,131				21,765
Other current liabilities			11,491				17,969
Total current liabilities		$	28,943			$	45,079
Film liability			18,919				22,158
Deferred income			3,110				2,463
Total long-term liabilities		$	22,029			$	24,621

Recent Accounting Pronouncements

Statement of Financial Accounting Standards No. 159, The Fair Value Option for Financial Assets and Financial Liabilities — including an amendment of FASB Statement No. 115 (“Statement 159”), was issued in February 2007. Statement 159 permits entities to choose to measure many financial instruments and certain other items at fair value that are not currently required to be measured at fair value. Statement 159 also establishes presentation and disclosure requirements designed to facilitate comparisons between entities that choose different measurement attributes for similar types of assets and liabilities. Statement 159 does not affect any existing accounting literature that requires certain assets and liabilities to be carried at fair value. Statement 159 does not eliminate

disclosure requirements included in other accounting standards, including requirements for disclosures about fair value measurements included in Statements No. 157, Fair Value Measurements, and No. 107, Disclosures about Fair Value of Financial Instruments. Statement 159 is effective as of the beginning of an entity’s first fiscal year that begins after November 15, 2007. The Company expects to adopt Statement 159 on January 1, 2008 and does not anticipate adoption to materially impact its financial position or results of operations.

New Accounting Standard

The Company adopted Financial Accounting Standard Board Interpretation No. 48, Accounting for Uncertainty in Income Taxes (“FIN 48”) on January 1, 2007. FIN 48 clarifies the accounting for uncertainty in income taxes recognized in the financial statements. FIN 48 prescribes a recognition threshold for the financial statement recognition and measurement of a tax position taken or expected to be taken within an income tax return. The adoption of FIN 48 resulted in a decrease of $0.2 million to the January 1, 2007 balance of “Retained deficit”, an increase of $101.7 million in “Other long term-liabilities” for unrecognized tax benefits and a decrease of $123.0 million in “Deferred income taxes”. The total amount of unrecognized tax benefits at January 1, 2007 was $416.1 million, inclusive of $89.6 million for interest. Of this total, $218.4 million represents the amount of unrecognized tax benefits that, if recognized, would favorably affect the effective income tax rate in future periods.

The Company continues to record interest and penalties related to unrecognized tax benefits in current income tax expense. The total amount of interest accrued during the six and three months ended June 30, 2007 was $19.6 million and $9.5 million, respectively. The total amount of unrecognized tax benefits at June 30, 2007 was $435.1 million.

The Company and its subsidiaries file income tax returns in the United States federal jurisdiction and various state and foreign jurisdictions. The Company is in the process of settling most federal issues for the tax years 2000, 2001 and 2002 with the Internal Revenue Service (“IRS”). The IRS is near completion of its field examinations of the Company’s tax returns through 2004. The Company expects to resolve several of its federal issues with the IRS within the next 12 months without any material adverse impact on the Company’s financial statements. Substantially all material state, local, and foreign income tax matters have been concluded for years through 1999.

Note 2: INTANGIBLE ASSETS AND GOODWILL

The Company has definite-lived intangible assets which consist primarily of transit and street furniture contracts and other contractual rights in its Americas and International outdoor segments, talent and program right contracts in its radio segment, and contracts for non-affiliated radio and television stations in the Company’s media representation operations, all of which are amortized over the respective lives of the agreements. Other definite-lived intangible assets are amortized over the period of time the assets are expected to contribute directly or indirectly to the Company’s future cash flows.

The following table presents the gross carrying amount and accumulated amortization for each major class of definite-lived intangible assets at June 30, 2007 and December 31, 2006:

(In thousands)		June 30, 2007								December 31, 2006
		Gross Carrying				Accumulated				Gross Carrying				Accumulated
		Amount				Amortization				Amount				Amortization
Transit, street furniture, and other outdoor contractual rights		$	837,445			$	565,791			$	821,364			$	530,063
Talent contracts			125,270				123,880				125,270				115,537
Representation contracts			367,093				193,122				349,493				175,658
Other			121,221				74,688				120,930				73,317
Total		$	1,451,029			$	957,481			$	1,417,057			$	894,575

Total amortization expense from definite-lived intangible assets for the six and three months ended June 30, 2007 and for the year ended December 31, 2006 was $54.7 million, $28.5 million and $150.7 million, respectively. The following table presents the Company’s estimate of amortization expense for each of the five succeeding fiscal years for definite-lived intangible assets:

(In thousands)

2008		$	82,192
2009			69,958
2010			51,962
2011			42,136
2012			40,593

As acquisitions and dispositions occur in the future and as purchase price allocations are finalized, amortization expense may vary.

The Company’s indefinite-lived intangible assets consist of FCC broadcast licenses and billboard permits. FCC broadcast licenses are granted to both radio and television stations for up to eight years under the Telecommunications Act of 1996. The Act requires the FCC to renew a broadcast license if: it finds that the station has served the public interest, convenience and necessity; there have been no serious violations of either the Communications Act of 1934 or the FCC’s rules and regulations by the licensee; and there have been no other serious violations which taken together constitute a pattern of abuse. The licenses may be renewed indefinitely at little or no cost. The Company does not believe that the technology of wireless broadcasting will be replaced in the foreseeable future. The Company’s billboard permits are issued in perpetuity by state and local governments and are transferable or renewable at little or no cost. Permits typically include the location which allows the Company the right to operate an advertising structure. The Company’s permits are located on either owned or leased land. In cases where the Company’s permits are located on leased land, the leases are typically from 10 to 20 years and renew indefinitely, with rental payments generally escalating at an inflation based index. If the Company loses its lease, the Company will typically obtain permission to relocate the permit or bank it with the municipality for future use.

The Company does not amortize its FCC broadcast licenses or billboard permits. The Company tests these indefinite-lived intangible assets for impairment at least annually using the direct method. Under the direct method, it is assumed that rather than acquiring indefinite-lived intangible assets as a part of a going concern business, the buyer hypothetically obtains indefinite-lived intangible assets and builds a new operation with similar attributes from scratch. Thus, the buyer incurs start-up costs during the build-up phase which are normally associated with going concern value. Initial capital costs are deducted from the discounted cash flows model which results in value that is directly attributable to the indefinite-lived intangible assets.

Under the direct method, the Company continues to aggregate its indefinite-lived intangible assets at the market level for purposes of impairment testing. The Company’s key assumptions using the direct method are market revenue growth rates, market share, profit margin, duration and profile of the build-up period, estimated start-up capital costs and losses incurred during the build-up period, the risk-adjusted discount rate and terminal values. This data is populated using industry normalized information.

Goodwill

The Company tests goodwill for impairment using a two-step process. The first step, used to screen for potential impairment, compares the fair value of the reporting unit with its carrying amount, including goodwill. The second step, used to measure the amount of the impairment loss, compares the implied fair value of the reporting unit goodwill with the carrying amount of that goodwill. The following table presents the changes in the carrying amount of goodwill in each of the Company’s reportable segments for the six month period ended June 30, 2007:

						Americas				International
(In thousands)		Radio				Outdoor				Outdoor				Other				Total
Balance as of December 31, 2006		$	5,987,831			$	667,986			$	425,630			$	577			$	7,082,024
Acquisitions			6,399				9,817				7,601				—				23,817
Dispositions			(4,296	)			—				—				—				(4,296	)
Foreign currency			—				6,398				7,873				—				14,271
Adjustments			613				(234	)			—				—				379
Balance as of June 30, 2007		$	5,990,547			$	683,967			$	441,104			$	577			$	7,116,195

Note 3: DERIVATIVE INSTRUMENTS

The Company holds options under two secured forward exchange contracts that limit its exposure to and benefit from price fluctuations in American Tower Corporation (“AMT”) over the terms of the contracts (the “AMT contracts”). These options are not designated as hedges of the underlying shares of AMT. The AMT contracts had a value of $19.8 million and $10.3 million recorded in “Other long term liabilities” at June 30, 2007 and December 31, 2006, respectively. For the six months ended June 30, 2007 and year ended December 31, 2006, the Company recognized losses of $9.5 million and $22.0 million, respectively, in “Gain (loss) on marketable securities” related to the change in fair value of the options. To offset the change in the fair value of these contracts, the Company has recorded AMT shares as trading securities. During the six months ended June 30, 2007 and year ended December 31, 2006, the Company recognized gains of $9.5 million and $20.5 million, respectively, in “Gain (loss) on marketable securities” related to the change in the fair value of the shares.

The Company is exposed to foreign currency exchange risks related to its investment in net assets in foreign countries. To manage this risk, the Company entered into two United States dollar — Euro cross currency swaps with an aggregate Euro notional amount of €706.0 million and a corresponding aggregate U.S. dollar notional amount of $877.7 million. These cross currency swaps had a value of $81.4 million at June 30, 2007 and $68.5 million at December 31, 2006, which was recorded in “Other long-term obligations”. These cross currency swaps require the Company to make fixed cash payments on the Euro notional amount while it receives fixed cash payments on the equivalent U.S. dollar notional amount, all on a semiannual basis. The Company has designated these cross currency swaps as a hedge of its net investment in Euro denominated assets. The Company selected the forward method under the guidance of the Derivatives Implementation Group Statement 133 Implementation Issue H8, Foreign Currency Hedges: Measuring the Amount of Ineffectiveness in a Net Investment Hedge. The forward method requires all changes in the fair value of the cross currency swaps and the semiannual cash payments to be reported as a cumulative translation adjustment in other comprehensive income in the same manner as the underlying hedged net assets. As of June 30, 2007, a $48.8 million loss, net of tax, was recorded as a cumulative translation adjustment to other comprehensive income related to the cross currency swap.

Note 4: RECENT DEVELOPMENTS

Acquisitions

The Company acquired Americas outdoor display faces and additional equity interests in international outdoor companies for $32.7 million in cash during the six months ended June 30, 2007. The Company’s national representation business acquired representation contracts for $18.8 million in cash during the six months ended June 30, 2007.

Disposition of Assets

The Company received proceeds of $18.3 million primarily related to the sale of representation contracts and international street furniture assets recorded in cash flows from investing activities and recorded a gain of $6.3 million in Gain (loss) on disposition of assets — net during the six months ended June 30, 2007. The Company also received proceeds of $57.7 million related to the sale of radio stations recorded as investing cash flows from discontinued operations and recorded a gain of $19.6 million as a component of Income from discontinued operations, net during the six months ended June 30, 2007.

Debt Maturities

On February 1, 2007, the Company redeemed its 3.125% Senior Notes at their maturity for $250.0 million plus accrued interest with proceeds from its bank credit facility.

Recent Legal Proceedings

The Company is currently involved in certain legal proceedings and, as required, has accrued our estimate of the probable costs for the resolution of these claims. These estimates have been developed in consultation with counsel and are based upon an analysis of potential results, assuming a combination of litigation and settlement strategies. It is possible, however, that future results of operations for any particular period could be materially affected by changes in management’s assumptions or the effectiveness of its strategies related to these proceedings.

Note 5: RESTRUCTURING

The Company restructured its outdoor operations in France in the third quarter of 2005. As a result, the Company recorded $26.6 million in restructuring costs as a component of selling, general and administrative expenses. Of the $26.6 million, $22.5 million was related to severance costs and $4.1 million was related to other costs. During 2007, $7.8 million of related costs were paid and charged to the restructuring accrual. As of June 30, 2007, the balance was $3.3 million.

Note 6: COMMITMENTS AND CONTINGENCIES

Certain agreements relating to acquisitions provide for purchase price adjustments and other future contingent payments based on the financial performance of the acquired companies. The Company will continue to accrue additional amounts related to such contingent payments if and when it is determinable that the applicable financial performance targets will be met. The aggregate of these contingent payments, if performance targets are met, would not significantly impact the financial position or results of operations of the Company.

As discussed in Note 4, there are various lawsuits and claims pending against the Company. Based on current assumptions, the Company has accrued its estimate of the probable costs for the resolution of these claims. Future results of operations could be materially affected by changes in these assumptions.

Note 7: GUARANTEES

Within the Company’s $1.75 billion credit facility, there exists a $150.0 million sub-limit available to certain of the Company’s international subsidiaries. This $150.0 million sub-limit allows for borrowings in various foreign currencies, which are used to hedge net assets in those currencies and provide funds to the Company’s international operations for certain working capital needs. Subsidiary borrowings under this sub-limit are guaranteed by the Company. At June 30, 2007, this portion of the $1.75 billion credit facility’s outstanding balance was $16.1 million, which is recorded in “Long-term debt” on the Company’s financial statements.

Within the Company’s bank credit facility agreement is a provision that requires the Company to reimburse lenders for any increased costs that they may incur in an event of a change in law, rule or regulation resulting in their reduced returns from any change in capital requirements. In addition to not being able to estimate the potential amount of any future payment under this provision, the Company is not able to predict if such event will ever occur.

The Company guarantees $40.1 million of credit lines provided to certain of its international subsidiaries by a major international bank. Most of these credit lines relate to intraday overdraft facilities covering participants in the Company’s European cash management pool. As of June 30, 2007, no amounts were outstanding under these agreements.

As of June 30, 2007, the Company has outstanding commercial standby letters of credit and surety bonds of $82.4 million and $41.2 million, respectively. These letters of credit and surety bonds relate to various operational matters including insurance, bid, and performance bonds as well as other items. Letters of credit issued under the Company’s $1.75 billion credit facility reduce the borrowing availability on the credit facility, and are included in the Company’s calculation of its leverage ratio covenant under the bank credit facilities. The surety bonds are not considered as borrowings under the Company’s bank credit facilities.

Note 8: SEGMENT DATA

The Company has three reportable segments, which it believes best reflects how the Company is currently managed — radio broadcasting, Americas outdoor advertising and International outdoor advertising. The Americas outdoor advertising segment consists primarily of our operations in the United States, Canada and Latin America, and the International outdoor segment includes operations primarily in Europe, Asia, Africa and Australia. The category “other” includes media representation and other general support services and initiatives. Revenue and expenses earned and charged between segments are recorded at fair value and eliminated in consolidation.

(In thousands)																		Corporate,
																		Merger
						Americas				International								and Gain on
		Radio				Outdoor				Outdoor								disposition of
		Broadcasting				Advertising				Advertising				Other				assets — net				Eliminations				Consolidated
Six Months Ended June 30, 2007
Revenue		$	1,692,622			$	693,866			$	833,703			$	106,804			$	—			$	(63,652	)		$	3,263,343
Direct operating expenses			462,749				279,799				543,549				41,601				—				(33,946	)			1,293,752
Selling, general and administrative expenses			562,305				110,368				151,722				50,917				—				(29,706	)			845,606
Depreciation and amortization			56,605				93,193				100,630				20,979				8,230				—				279,637
Corporate expenses			—				—				—				—				91,194				—				91,194
Merger expenses			—				—				—				—				4,370				—				4,370
Gain on disposition of assets — net			—				—				—				—				11,041				—				11,041
Operating income (loss)		$	610,963			$	210,506			$	37,802			$	(6,693	)		$	(92,753	)		$	—			$	759,825
Intersegment revenues		$	22,629			$	6,734			$	—			$	34,289			$	—			$	—			$	63,652
Identifiable assets		$	11,717,492			$	2,798,497			$	2,451,724			$	700,638			$	321,637			$	—			$	17,989,988
Capital expenditures		$	35,962			$	50,464			$	61,654			$	4,293			$	—			$	—			$	152,373
Share-based payments		$	11,140			$	3,592			$	770			$	—			$	6,083			$	—			$	21,585
Six Months Ended June 30, 2006
Revenue		$	1,658,254			$	609,349			$	737,423			$	111,811			$	—			$	(59,981	)		$	3,056,856
Direct operating expenses			467,002				248,933				469,622				41,726				—				(32,829	)			1,194,454
Selling, general and administrative expenses			567,413				98,817				135,817				52,543				—				(27,152	)			827,438
Depreciation and amortization			60,276				83,485				113,662				22,682				9,194				—				289,299
Corporate expenses			—				—				—				—				88,746				—				88,746
Gain on disposition of assets — net			—				—				—				—				49,221				—				49,221
Operating income (loss)		$	563,563			$	178,114			$	18,322			$	(5,140	)		$	(48,719	)		$	—			$	706,140
Intersegment revenues		$	20,108			$	4,918			$	—			$	34,955			$	—			$	—			$	59,981
Identifiable assets		$	11,705,732			$	2,629,819			$	2,337,087			$	679,835			$	525,548			$	—			$	17,878,021
Capital expenditures		$	41,454			$	31,536			$	73,808			$	957			$	—			$	—			$	147,755
Share-based payments		$	12,619			$	2,387			$	666			$	828			$	5,735			$	—			$	22,235
Three Months Ended June 30, 2007
Revenue		$	918,351			$	376,843			$	459,870			$	56,171			$	—			$	(32,998	)		$	1,778,237
Direct operating expenses			235,683				144,885				284,258				21,665				—				(15,397	)			671,094
Selling, general and administrative expenses			295,407				56,125				78,432				25,561				—				(17,601	)			437,924
Depreciation and amortization			28,153				46,632				51,521				10,917				4,087				—				141,310
Corporate expenses			—				—				—				—				43,044				—				43,044
Merger expenses			—				—				—				—				2,684				—				2,684
Gain on disposition of assets — net			—				—				—				—				4,090				—				4,090
Operating income (loss)		$	359,108			$	129,201			$	45,659			$	(1,972	)		$	(45,725	)		$	—			$	486,271
Intersegment revenues		$	12,207			$	4,851			$	—			$	15,940			$	—			$	—			$	32,998
Share-based payments		$	6,676			$	2,466			$	529			$	—			$	3,668			$	—			$	13,339

(In thousands)																		Corporate,
																		Merger and
						Americas				International								Gain on
		Radio				Outdoor				Outdoor								disposition of
		Broadcasting				Advertising				Advertising				Other				assets — net				Eliminations				Consolidated
Three Months Ended June 30, 2006
Revenue		$	910,194			$	335,247			$	413,156			$	59,656			$	—			$	(29,409	)		$	1,688,844
Direct operating expenses			237,092				128,922				245,237				20,913				—				(14,841	)			617,323
Selling, general and administrative expenses			300,678				50,623				68,976				26,750				—				(14,568	)			432,459
Depreciation and amortization			31,047				41,253				59,574				11,392				4,923				—				148,189
Corporate expenses			—				—				—				—				48,239				—				48,239
Gain on disposition of assets — net			—				—				—				—				821				—				821
Operating income (loss)		$	341,377			$	114,449			$	39,369			$	601			$	(52,341	)		$	—			$	443,455
Intersegment revenues		$	9,310			$	3,131			$	—			$	16,968			$	—			$	—			$	29,409
Share-based payments		$	6,310			$	1,230			$	343			$	413			$	2,332			$	—			$	10,628

Revenue of $888.0 million and $785.0 million derived from foreign operations are included in the data above for the six months ended June 30, 2007 and 2006, respectively. Revenue of $489.5 million and $439.6 million derived from foreign operations are included in the data above for the three months ended June 30, 2007 and 2006, respectively. Identifiable assets of $2.7 billion and $2.6 billion derived from foreign operations are included in the data above for the six months ended June 30, 2007 and 2006, respectively.

Note 9: SUBSEQUENT EVENTS

On July 27, 2007, the Company’s Board of Directors declared a quarterly cash dividend of $0.1875 per share on the Company’s Common Stock. The dividend is payable on October 15, 2007 to shareholders of record at the close of business on September 30, 2007.

The Company announced on July 17, 2007 that it has set a new record date for the special meeting of shareholders regarding the proposed merger with the group co-led by Bain Capital Partners, LLC and Thomas H. Lee Partners, L.P. The Company’s shareholders of record as of 5:00 p.m. Eastern Daylight Savings Time on July 27, 2007, will be entitled to vote at the special meeting.

Subsequent to June 30, 2007, the Company entered into definitive agreements for the sale of 13 additional radio stations. The closing of these sales is subject to antitrust clearances, FCC approval and other customary closing conditions. The Company also completed the sale of 11 radio stations it had under definitive asset purchase agreements at June 30, 2007.

Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Proposed Merger with a Group led by Thomas H. Lee Partners, L.P. and Bain Capital Partners, LLC

     On May 17, 2007, we entered into a second amendment to our previously announced Merger Agreement with a private equity group co-led by Thomas H. Lee Partners, L.P. and Bain Capital Partners, LLC. Under the terms of the Merger Agreement, as amended, the Company’s shareholders can elect to have each share of Company’s common stock they own to be converted into the right to receive either (1) $39.20 in cash, without interest, or (2) one share of Class A common stock of CC Media Holdings, Inc., a corporation formed by the private equity group that, after the merger, will be the ultimate corporate parent of the Company.

     Unaffiliated shareholders and option holders of the Company will have the right to select the form of merger consideration they receive. This election is subject to pro rata adjustment in the event that elections to receive Class A common stock would require CC Media Holdings, Inc. to issue more than 30.6 million shares of Class A common stock, or approximately 30% of the outstanding capital stock and voting power of CC Media Holdings, Inc. immediately following the merger. In addition, no shareholder or option holder who has selected the stock consideration may be allocated a number of CC Media Holdings, Inc. Class A common stock representing more than 9.9% of the outstanding common stock of CC Media Holdings, Inc. immediately following the merger. The limitation on the aggregate number of shares to be issued as stock consideration will allow up to a maximum of approximately 6% of the shares of the Company’s common stock and stock options outstanding as of the record date of the special meeting to be converted into Class A common stock of CC Media Holdings, Inc. as merger consideration.

     We announced on July 17, 2007 that we set a new record date for the special meeting of shareholders regarding the second amendment to our Merger Agreement. Our shareholders of record as of 5:00 p.m. Eastern Daylight Savings Time on July 27, 2007, will be entitled to vote at the special meeting.

     The consummation of the merger is subject to shareholder approval, antitrust clearances, FCC approval and other customary closing conditions. Assuming satisfaction of the closing conditions, the parties expect to close the merger during the fourth quarter of 2007.

Sale of Radio Stations and all of our Television Stations

     On November 16, 2006, we announced plans to sell 448 radio stations and all of our television stations. The sale of these assets is not contingent on the closing of the merger described above. Definitive asset purchase agreements were signed for 374 radio stations, 8 of which were not part of the announced 448 stations, as of June 30, 2007. These stations, along with 26 stations which were sold in the fourth quarter of 2006 and first six months of 2007, 5 of which were not part of the announced 448 stations, were classified as assets from discontinued operations in our consolidated balance sheet and as discontinued operations in our consolidated statements of operations. Through August 7, 2007, we had definitive asset purchase agreements for the sale of 13 additional radio stations. The closing of these sales is subject to antitrust clearances, FCC approval and other customary closing conditions. Also through August 7, 2007, we completed the sales of 11 radio stations that were under definitive agreement at June 30, 2007.

     On April 20, 2007, we announced that we entered into a definitive agreement to sell our television business for approximately $1.2 billion. The sale of our television business is not contingent on the closing of the merger described above. The transaction is expected to close in the fourth quarter of 2007, subject to regulatory approvals and other customary closing conditions. Our television business is reported as assets and liabilities of discontinued operations on our consolidated balance sheet and the results of operations as discontinued operations on our statements of operations.

Format of Presentation

     Management’s discussion and analysis of our results of operations and financial condition should be read in conjunction with the consolidated financial statements and related footnotes. Our discussion is presented on both a consolidated and segment basis. Our reportable operating segments are Radio Broadcasting, or radio, which includes our national syndication business, Americas Outdoor Advertising, or Americas, and International Outdoor Advertising, or International. Included in the “other” segment are our media representation business, Katz Media, as well as other general support services and initiatives.

     We manage our operating segments primarily focusing on their operating income, while Corporate expenses, Merger expenses, Gain (loss) on disposition of assets — net, Interest expense, Gain (loss) on marketable securities, Equity in earnings of nonconsolidated affiliates, Other income (expense) — net, Income tax benefit (expense) and Minority interest — net of tax are managed on a total company basis and are, therefore, included only in our discussion of consolidated results.

Radio Broadcasting

     Our revenues are derived from selling advertising time, or spots, on our radio stations, with advertising contracts typically less than one year. The formats are designed to reach audiences with targeted demographic characteristics that appeal to our advertisers. Management monitors average advertising rates, which are principally based on the length of the spot and how many people in a targeted audience listen to our stations, as measured by an independent ratings service. The size of the market influences rates as well, with larger markets typically receiving higher rates than smaller markets. Also, our advertising rates are influenced by the time of day the advertisement airs, with morning and evening drive-time hours typically the highest. Management monitors yield in addition to average rates because yield allows management to track revenue performance across our inventory. Yield is defined by management as revenue earned divided by commercial capacity available.

     Management monitors macro level indicators to assess our radio operations’ performance. Due to the geographic diversity and autonomy of our markets, we have a multitude of market specific advertising rates and audience demographics. Therefore, management reviews average unit rates across all of our stations.

     Management looks at our radio operations’ overall revenues as well as local advertising, which is sold predominately in a station’s local market, and national advertising, which is sold across multiple markets. Local advertising is sold by each radio stations’ sales staffs while national advertising is sold, for the most part, through our national representation firm. Local advertising, which is our largest source of advertising revenue, and national advertising revenues are tracked separately, because these revenue streams have different sales forces and respond differently to changes in the economic environment.

     Management also looks at radio revenue by market size, as defined by Arbitron. Typically, larger markets can reach larger audiences with wider demographics than smaller markets. Additionally, management reviews our share of target demographics listening to the radio in an average quarter hour. This metric gauges how well our formats are attracting and retaining listeners.

     A portion of our radio segment’s expenses vary in connection with changes in revenue. These variable expenses primarily relate to costs in our sales department, such as salaries, commissions and bad debt. Our programming and general and administrative departments incur most of our fixed costs, such as talent costs, rights fees, utilities and office salaries. Lastly, our highly discretionary costs are in our marketing and promotions department, which we primarily incur to maintain and/or increase our audience share.

Americas and International Outdoor Advertising

     Our revenues are derived from selling advertising space on the displays that we own or operate in key markets worldwide consisting primarily of billboards, street furniture and transit displays. We own the majority of our advertising displays, which typically are located on sites that we either lease or own or for which we have acquired permanent easements. Our advertising contracts typically outline the number of displays reserved, the duration of the advertising campaign and the unit price per display.

     Our advertising rates are based on the gross rating points, or total number of impressions delivered by a display or group of displays, expressed as a percentage of a market population. The number of impressions delivered by a display is measured by the number of people passing the site during a defined period of time and, in some international markets, is weighted to account for such factors as illumination, proximity to other displays and the speed and viewing angle of approaching traffic. Management typically monitors our business by reviewing the average rates, average revenues per display, or yield, occupancy, and inventory levels of each of our display types by market. In addition, because a significant portion of our advertising operations are conducted in foreign markets, principally France and the United Kingdom, management reviews the operating results from our foreign operations on a constant dollar basis. A constant dollar basis allows for comparison of operations independent of foreign exchange movements. Because revenue-sharing and minimum guaranteed payment arrangements are more prevalent in our International operations, the margins in our International operations typically are less than the margins in our Americas operations.

     The significant expenses associated with our operations include (i) direct production, maintenance and installation expenses, (ii) site lease expenses for land under our displays and (iii) revenue-sharing or minimum guaranteed amounts payable under our street furniture and transit display contracts. Our direct production, maintenance and installation expenses include costs for printing, transporting and changing the advertising copy on our displays, the related labor costs, the vinyl and paper costs and the costs for cleaning and maintaining our displays. Vinyl and paper costs vary according to the complexity of the advertising copy and the quantity of displays. Our site lease expenses include lease payments for use of the land under our displays, as well as any revenue-sharing arrangements or minimum guaranteed amounts payable that we may have with the landlords. The terms of our site leases and revenue-sharing or minimum guaranteed contracts generally range from 1 to 20 years.

     Our street furniture and transit display contracts, the terms of which range from 3 to 20 years, generally require us to make upfront investments in property, plant and equipment. These contracts may also include upfront lease payments and/or minimum

annual guaranteed lease payments. We can give no assurance that our cash flows from operations over the terms of these contracts will exceed the upfront and minimum required payments.

     The results in 2007 include our acquisition of Interspace Airport Advertising, or Interspace, which we acquired in July 2006.

FAS 123(R), Share-Based Payment

     As of June 30, 2007, there was $113.5 million of total unrecognized compensation cost related to nonvested share-based compensation arrangements. This cost is expected to be recognized over a weighted average period of approximately three years. The following table details compensation costs related to share-based payments for the three and six months ended June 30, 2007 and 2006:

		Three Months ended June 30,								Six Months ended June 30,
(In millions)		2007				2006				2007				2006
Radio Broadcasting
Direct Operating Expenses		$	3.0			$	2.8			$	5.0			$	5.6
SG&A			3.7				3.5				6.1				7.0
Americas Outdoor Advertising
Direct Operating Expenses		$	1.8			$	0.9			$	2.6			$	1.7
SG&A			0.7				0.3				1.0				0.6
International Outdoor Advertising
Direct Operating Expenses		$	0.4			$	0.2			$	0.6			$	0.4
SG&A			0.1				0.1				0.2				0.2
Other
Direct Operating Expenses		$	—			$	0.2			$	—			$	0.4
SG&A			—				0.3				—				0.6
Corporate		$	3.7			$	2.3			$	6.1			$	5.7

The comparison of Three and Six Months Ended June 30, 2007 to Three and Six Months Ended June 30, 2006 is as follows:

(In thousands)		Three Months Ended June 30,								%				Six Months Ended June 30,								%
		2007				2006				Change				2007				2006				Change
Revenue		$	1,778,237			$	1,688,844				5	%		$	3,263,343			$	3,056,856				7	%
Operating expenses:
Direct operating expenses			671,094				617,323				9	%			1,293,752				1,194,454				8	%
Selling, general and administrative expenses			437,924				432,459				1	%			845,606				827,438				2	%
Depreciation and amortization			141,310				148,189				(5	%)			279,637				289,299				(3	%)
Corporate expenses			43,044				48,239				(11	%)			91,194				88,746				3	%
Merger expenses			2,684				—								4,370				—
Gain (loss) on disposition of assets — net			4,090				821								11,041				49,221
Operating income			486,271				443,455				10	%			759,825				706,140				8	%
Interest expense			116,422				123,298								234,499				237,674
Gain (loss) on marketable securities			(410	)			(1,000	)							(15	)			(3,324	)
Equity in earnings of nonconsolidated affiliates			11,435				9,715								16,699				16,624
Other income (expense) — net			340				(4,609	)							328				(5,257	)
Income before income taxes, minority interest and discontinued operations			381,214				324,263								542,338				476,509
Income tax benefit (expense):
Current			(120,989	)			(104,542	)							(150,782	)			(106,764	)
Deferred			(36,494	)			(33,417	)							(73,912	)			(93,931	)
Income tax benefit (expense)			(157,483	)			(137,959	)							(224,694	)			(200,695	)
Minority interest expense, net of tax			14,970				13,736								15,245				12,957
Income before discontinued operations			208,761				172,568								302,399				262,857
Income from discontinued operations, net			27,229				24,920								35,813				31,445
Net income		$	235,990			$	197,488							$	338,212			$	294,302

Consolidated Revenue

Three Months

     Our consolidated revenues increased $89.4 million during the second quarter of 2007 compared to the same period of 2006. Our International revenue increased $46.7 million, including approximately $28.1 million related to movements in foreign exchange. In addition to foreign exchange, International revenue growth was led by street furniture revenues. Our Americas revenue increased $41.6 million. Interspace, which we acquired in July 2006, contributed approximately $15.1 million of the increase. In addition to Interspace, our Americas revenue growth was led by bulletin revenues. Our radio revenue increased $8.2 million primarily from an increase in our syndicated radio programming, traffic and on-line businesses. These increases were partially offset by declines from operations classified in our “other” segment.

Six Months

     Our consolidated revenues increased $206.5 million during the six months of 2007 compared to the same period of 2006. Our International revenue increased $96.3 million, including approximately $59.3 million related to movements in foreign exchange. In addition to foreign exchange, International revenue growth was led by street furniture revenues. Our Americas revenue increased $84.5 million with Interspace contributing approximately $30.4 million of the increase. In addition to Interspace, our Americas revenue growth was led by bulletin revenues. Our radio revenue increased $34.4 million primarily from an increase in our syndicated radio programming, traffic and on-line businesses. These increases were partially offset by declines from operations classified in our “other” segment.

Consolidated Direct Operating Expenses

Three Months

     Our consolidated direct operating expenses increased approximately $53.8 million during the second quarter of 2007 compared to the same period of 2006. International direct operating expenses increased $39.0 million primarily from $18.5 million related to movements in foreign exchange. Americas direct operating expenses increased $16.0 million with Interspace contributing

approximately $7.0 million. Partially offsetting these increases was a decline in our radio direct operating expenses of approximately $1.4 million primarily from a decline in programming expenses and expenses associated with non-traditional revenue.

Six Months

     Our consolidated direct operating expenses increased approximately $99.3 million during the first six months of 2007 compared to the same period of 2006. International direct operating expenses increased $73.9 million primarily from $41.0 million related to movements in foreign exchange. Americas direct operating expenses increased $30.9 million with Interspace contributing approximately $13.6 million. Partially offsetting these increases was a decline in our radio direct operating expenses of approximately $4.3 million primarily from a decline in programming expenses and expenses associated with non-traditional revenue.

Consolidated Selling, General and Administrative Expenses, or SG&A

Three Months

     Our consolidated SG&A expenses increased approximately $5.5 million during the second quarter of 2007 compared to the same period of 2006. International SG&A expenses increased $9.5 million primarily related to movements in foreign exchange. Americas SG&A expenses increased $5.5 million attributable to $3.6 million from Interspace and the rest primarily attributable to sales expenses associated with the increase in revenue. Our radio SG&A expenses decreased $5.3 million for the same period primarily driven by a decrease in selling expenses. We also experienced expense declines from operations classified in our “other” segment.

Six Months

     Our consolidated SG&A expenses increased approximately $18.2 million during the first six months of 2007 compared to the same period of 2006. International SG&A expenses increased $15.9 million primarily related to movements in foreign exchange. Americas SG&A expenses increased $11.6 million attributable to $6.6 million from Interspace and the rest primarily attributable to sales expenses associated with the increase in revenue. Our radio SG&A expenses decreased $5.1 million for the same period primarily driven by a decrease in selling expenses. We also experienced expense declines from operations classified in our “other” segment.

Corporate Expenses

     Corporate expenses decreased $5.2 million for the three months ended June 30, 2007 compared to the same period of 2006 primarily as a result of a reduction in legal costs associated with the completion of and favorable rulings surrounding certain legal cases. Corporate expenses increased $2.4 million for the six months ended June 30, 2007 compared to the same period of 2006 primarily as a result of an increase in bonus expenses.

Gain (loss) on Disposition of Assets — Net

     The gain on disposition of assets declined approximately $38.2 million primarily as a result of gains recognized in the first quarter of 2006 including a $15.1 million gain in our Americas outdoor segment from the exchange of assets in one of our markets for the assets of a third party located in a different market and $22.5 million in our radio segment primarily from the sale of programming rights in one of our markets.

Interest Expense

     Interest expense declined $6.9 million and $3.2 million in the second quarter of 2007 and six months ended June 30, 2007, respectively, compared to the same periods of 2006. The declines were primarily from a reduction in our outstanding debt related to the maturity of our 6% Senior Notes in November 2006 and the maturity of our 3.125% Senior Notes in February 2007. Our weighted average cost of debt at June 30, 2007 and 2006 was 6.2%.

Income Tax Benefit (Expense)

     Current tax expense increased $16.4 million primarily due to the increase in Income before income taxes, while our effective rate remained relatively flat, for the three months ended June 30, 2007 compared to the three months ended June 30, 2006.

     Current tax expense increased $44.0 million primarily due to the increase in Income before income taxes of $65.8 million, while our effective rate remained relatively flat, for the six months ended June 30, 2007 compared to the six months ended June 30, 2006. In addition, the Company recorded approximately $22.2 million in current tax benefit during the six months ended June 30, 2006 related to tax losses in excess of the amount reported for financial reporting purposes from the disposition of certain operating assets. Deferred tax expense for the six months ended June 30, 2007 decreased $20.0 million compared to the six months ended June

     30, 2006 primarily due to deferred tax expense of $22.2 million being recorded during the six months ended June 30, 2006 related to the disposition of certain operating assets mentioned above.

Segment Revenue and Divisional Operating Expenses

Radio Broadcasting

(In thousands)		Three Months Ended June 30,								%				Six Months Ended June 30,								%
		2007				2006				Change				2007				2006				Change
Revenue		$	918,351			$	910,194				1	%		$	1,692,622			$	1,658,254				2	%
Direct operating expenses			235,683				237,092				(1	%)			462,749				467,002				(1	%)
Selling, general and administrative expenses			295,407				300,678				(2	%)			562,305				567,413				(1	%)
Depreciation and amortization			28,153				31,047				(9	%)			56,605				60,276				(6	%)
Operating income		$	359,108			$	341,377				5	%		$	610,963			$	563,563				8	%

Three Months

     Our radio revenue increased 1% during the second quarter of 2007 as compared to 2006 primarily from an increase in our syndicated radio programming, traffic and on-line businesses. Also contributing to the revenue growth was growth in our mid-size markets. Average unit rates for our 15, 30 and 60 second commercials also increased in the second quarter of 2007 compared to the same period of the prior year. Advertising categories that increased were services and health and beauty offset by a decline in automotive and retail.

     Our radio direct operating expenses decreased approximately $1.4 million during the second quarter of 2007 as compared to 2006 primarily from a decline of approximately $4.8 million in programming expenses and expenses associated with non-traditional revenue, partially offset by an increase of $3.4 million principally from increases in our traffic and on-line expenses. Our SG&A expenses decreased $5.3 million for the same period primarily driven by a decrease in selling expenses.

Six Months

     Our radio revenue increased 2% during the first six months of 2007 as compared to 2006 primarily from an increase in our syndicated radio programming, traffic and on-line businesses. National revenues and revenue growth in our top 100 markets also contributed to the revenue growth. Advertising categories contributing to the revenue growth for the first six months of 2007 were services, health and beauty, entertainment and restaurants. Our radio direct operating expenses decreased approximately $4.3 million primarily from a decline of $17.3 million in programming, news and sports expenses and expenses associated with non-traditional revenue, partially offset by an increase of $13.0 million principally from increases in our traffic and on-line expenses associated with the increase in revenue from these businesses during the first six months of 2007 as compared to the same period of 2006. Our SG&A expenses decreased $5.1 million for the same period primarily driven by a decrease in selling expenses.

Americas Outdoor Advertising

(In thousands)		Three Months Ended June 30,								%				Six Months Ended June 30,								%
		2007				2006				Change				2007				2006				Change
Revenue		$	376,843			$	335,247				12	%		$	693,866			$	609,349				14	%
Direct operating expenses			144,885				128,922				12	%			279,799				248,933				12	%
Selling, general and administrative expenses			56,125				50,623				11	%			110,368				98,817				12	%
Depreciation and amortization			46,632				41,253				13	%			93,193				83,485				12	%
Operating income		$	129,201			$	114,449				13	%		$	210,506			$	178,114				18	%

Three Months

     Our Americas revenue increased $41.6 million, or 12%, during the second quarter of 2007 as compared to 2006. Interspace contributed approximately $15.1 million to the increase. We experienced rate increases across our inventory. The growth was led by bulletin revenues due to the increased rates while occupancy was essentially flat in 2007 compared to 2006. Revenue growth occurred across many of our markets, including Boston, Washington, Philadelphia and Seattle. Advertising categories that contributed to the growth were automotive, telecommunications and retail.

     Direct operating expenses increased $16.0 million in the second quarter of 2007 as compared to 2006 with Interspace contributing approximately $7.0 million and site-lease expenses contributing $6.5 million during this same period. SG&A expenses increased $5.5 million attributable to $3.6 million from Interspace and the rest primarily attributable to sales expenses associated with the increase in revenue.

     Depreciation and amortization increased $5.4 million primarily associated with $3.3 million from Interspace.

Six Months

     Our Americas revenue increased 14%, or $84.5 million, during the six months ended June 30, 2007 as compared to the same period of 2006. Interspace contributed approximately $30.4 million to the increase. Bulletin revenues also contributed to the increase in revenues. Direct operating expenses increased $30.9 million in the six months ended June 30, 2007 over the same period of 2006 primarily from an increase of $13.6 million related to Interspace and an increase in site lease expenses of approximately $13.8 million. Our SG&A expenses increased $11.6 million in the first six months of 2007 over the same period of 2006. Interspace contributed approximately $6.6 million to the increase and the rest of the increase was attributable to bonus and commission expenses.

     Depreciation and amortization increased $9.7 million primarily associated with $6.3 million from Interspace.

International Outdoor Advertising

(In thousands)		Three Months Ended June 30,								%				Six Months Ended June 30,								%
		2007				2006				Change				2007				2006				Change
Revenue		$	459,870			$	413,156				11	%		$	833,703			$	737,423				13	%
Direct operating expenses			284,258				245,237				16	%			543,549				469,622				16	%
Selling, general and administrative expenses			78,432				68,976				14	%			151,722				135,817				12	%
Depreciation and amortization			51,521				59,574				(14	%)			100,630				113,662				(11	%)
Operating income		$	45,659			$	39,369				16	%		$	37,802			$	18,322				106	%